Microsoft Excel LibreOffice Calc

General Motors Co. (GM)


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Goodwill

Goodwill is not amortized but rather tested for impairment annually on October 1 or when events occur or circumstances change that would trigger such a review. The impairment test entails an assessment of qualitative factors to determine whether it is more likely than not that an impairment exists. If it is more likely than not that an impairment exists, then a quantitative impairment test is performed. Impairment exists when the carrying amount of a reporting unit exceeds its fair value.

Intangible Assets, net

Intangible assets, excluding goodwill, primarily include brand names, technology and intellectual property, customer relationships and dealer networks. Intangible assets are amortized on a straight-line or an accelerated method of amortization over their estimated useful lives. An accelerated amortization method reflecting the pattern in which the asset will be consumed is utilized if that pattern can be reliably determined. General Motors considers the period of expected cash flows and underlying data used to measure the fair value of the intangible assets when selecting a useful life. Amortization of developed technology and intellectual property is recorded in Automotive and other cost of sales. Amortization of brand names, customer relationships and General Motors’ dealer networks is recorded in Automotive and other selling, general and administrative expense or GM Financial interest, operating and other expenses. Impairment charges, if any, related to intangible assets are recorded in Automotive and other selling, general and administrative expense or Automotive and other cost of sales.

Source: 10-K (filing date: 2019-02-06).


Goodwill and Intangible Assets Disclosure

General Motors Co., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Technology and intellectual property 734  8,092  8,399  8,263  8,289 
Brands 4,299  4,302  4,421  4,427  4,447 
Dealer network, customer relationships and other 968  1,310  1,356  1,346  1,439 
Intangible assets, gross carrying amount 6,001  13,704  14,176  14,036  14,175 
Accumulated amortization (2,283) (9,712) (9,785) (9,460) (9,192)
Intangible assets, net carrying amount 3,718  3,992  4,391  4,576  4,983 
Goodwill 1,861  1,857  1,868  1,371  1,427 
Goodwill and intangible assets, net 5,579  5,849  6,259  5,947  6,410 

Based on: 10-K (filing date: 2019-02-06), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-07), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04).

Item Description The company
Intangible assets, net carrying amount Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. General Motors Co.’s intangible assets, net carrying amount declined from 2016 to 2017 and from 2017 to 2018.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. General Motors Co.’s goodwill declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Goodwill and intangible assets, net Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. General Motors Co.’s goodwill and intangible assets, net declined from 2016 to 2017 and from 2017 to 2018.

Analyst Adjustments: Removal of Goodwill

General Motors Co., adjustments to financial data

USD $ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Total Assets
Total assets (as reported) 227,339  212,482  221,690  194,520  177,677 
Less: Goodwill 1,861  1,857  1,868  1,371  1,427 
Total assets (adjusted) 225,478  210,625  219,822  193,149  176,250 
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported) 38,860  35,001  43,836  39,871  35,457 
Less: Goodwill 1,861  1,857  1,868  1,371  1,427 
Stockholders’ equity (adjusted) 36,999  33,144  41,968  38,500  34,030 
Adjustment to Net Income (loss) Attributable To Stockholders
Net income (loss) attributable to stockholders (as reported) 8,014  (3,864) 9,427  9,687  3,949 
Add: Goodwill impairment charges —  —  —  —  120 
Net income (loss) attributable to stockholders (adjusted) 8,014  (3,864) 9,427  9,687  4,069 

Based on: 10-K (filing date: 2019-02-06), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-07), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04).


General Motors Co., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Goodwill (Summary)

General Motors Co., adjusted ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net Profit Margin
Reported net profit margin 6.02% -2.90% 6.01% 6.64% 2.61%
Adjusted net profit margin 6.02% -2.90% 6.01% 6.64% 2.69%
Total Asset Turnover
Reported total asset turnover 0.59 0.63 0.71 0.75 0.85
Adjusted total asset turnover 0.59 0.63 0.71 0.76 0.86
Financial Leverage
Reported financial leverage 5.85 6.07 5.06 4.88 5.01
Adjusted financial leverage 6.09 6.35 5.24 5.02 5.18
Return on Equity (ROE)
Reported ROE 20.62% -11.04% 21.51% 24.30% 11.14%
Adjusted ROE 21.66% -11.66% 22.46% 25.16% 11.96%
Return on Assets (ROA)
Reported ROA 3.53% -1.82% 4.25% 4.98% 2.22%
Adjusted ROA 3.55% -1.83% 4.29% 5.02% 2.31%

Based on: 10-K (filing date: 2019-02-06), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-07), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. General Motors Co.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. General Motors Co.’s adjusted total asset turnover deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
General Motors Co.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. General Motors Co.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. General Motors Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

General Motors Co., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) attributable to stockholders 8,014  (3,864) 9,427  9,687  3,949 
Automotive net sales and revenue 133,045  133,449  156,849  145,922  151,092 
Ratio
Net profit margin1 6.02% -2.90% 6.01% 6.64% 2.61%
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) attributable to stockholders 8,014  (3,864) 9,427  9,687  4,069 
Automotive net sales and revenue 133,045  133,449  156,849  145,922  151,092 
Ratio
Adjusted net profit margin2 6.02% -2.90% 6.01% 6.64% 2.69%

Based on: 10-K (filing date: 2019-02-06), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-07), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04).

2018 Calculations

1 Net profit margin = 100 × Net income (loss) attributable to stockholders ÷ Automotive net sales and revenue
= 100 × 8,014 ÷ 133,045 = 6.02%

2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to stockholders ÷ Automotive net sales and revenue
= 100 × 8,014 ÷ 133,045 = 6.02%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. General Motors Co.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Total Asset Turnover

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Automotive net sales and revenue 133,045  133,449  156,849  145,922  151,092 
Total assets 227,339  212,482  221,690  194,520  177,677 
Ratio
Total asset turnover1 0.59 0.63 0.71 0.75 0.85
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Automotive net sales and revenue 133,045  133,449  156,849  145,922  151,092 
Adjusted total assets 225,478  210,625  219,822  193,149  176,250 
Ratio
Adjusted total asset turnover2 0.59 0.63 0.71 0.76 0.86

Based on: 10-K (filing date: 2019-02-06), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-07), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04).

2018 Calculations

1 Total asset turnover = Automotive net sales and revenue ÷ Total assets
= 133,045 ÷ 227,339 = 0.59

2 Adjusted total asset turnover = Automotive net sales and revenue ÷ Adjusted total assets
= 133,045 ÷ 225,478 = 0.59

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. General Motors Co.’s adjusted total asset turnover deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Total assets 227,339  212,482  221,690  194,520  177,677 
Stockholders’ equity 38,860  35,001  43,836  39,871  35,457 
Ratio
Financial leverage1 5.85 6.07 5.06 4.88 5.01
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted total assets 225,478  210,625  219,822  193,149  176,250 
Adjusted stockholders’ equity 36,999  33,144  41,968  38,500  34,030 
Ratio
Adjusted financial leverage2 6.09 6.35 5.24 5.02 5.18

Based on: 10-K (filing date: 2019-02-06), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-07), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04).

2018 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= 227,339 ÷ 38,860 = 5.85

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 225,478 ÷ 36,999 = 6.09

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
General Motors Co.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Adjusted Return on Equity (ROE)

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) attributable to stockholders 8,014  (3,864) 9,427  9,687  3,949 
Stockholders’ equity 38,860  35,001  43,836  39,871  35,457 
Ratio
ROE1 20.62% -11.04% 21.51% 24.30% 11.14%
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) attributable to stockholders 8,014  (3,864) 9,427  9,687  4,069 
Adjusted stockholders’ equity 36,999  33,144  41,968  38,500  34,030 
Ratio
Adjusted ROE2 21.66% -11.66% 22.46% 25.16% 11.96%

Based on: 10-K (filing date: 2019-02-06), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-07), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04).

2018 Calculations

1 ROE = 100 × Net income (loss) attributable to stockholders ÷ Stockholders’ equity
= 100 × 8,014 ÷ 38,860 = 20.62%

2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to stockholders ÷ Adjusted stockholders’ equity
= 100 × 8,014 ÷ 36,999 = 21.66%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. General Motors Co.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

Adjusted Return on Assets (ROA)

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) attributable to stockholders 8,014  (3,864) 9,427  9,687  3,949 
Total assets 227,339  212,482  221,690  194,520  177,677 
Ratio
ROA1 3.53% -1.82% 4.25% 4.98% 2.22%
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) attributable to stockholders 8,014  (3,864) 9,427  9,687  4,069 
Adjusted total assets 225,478  210,625  219,822  193,149  176,250 
Ratio
Adjusted ROA2 3.55% -1.83% 4.29% 5.02% 2.31%

Based on: 10-K (filing date: 2019-02-06), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-07), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04).

2018 Calculations

1 ROA = 100 × Net income (loss) attributable to stockholders ÷ Total assets
= 100 × 8,014 ÷ 227,339 = 3.53%

2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to stockholders ÷ Adjusted total assets
= 100 × 8,014 ÷ 225,478 = 3.55%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. General Motors Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.